Industries Qatar Drops Most in Year as VTB Says Sell: Doha Mover

By Zahra Hankir -
Feb 14, 2013

Industries Qatar fell the most in 11
months after the Middle East’s second-biggest petrochemicals
maker was cut to sell at VTB Capital Plc, which said a rally
this year is overdone given downside risks to fertilizer prices.

The stock tumbled 2.5 percent, the most since March 20, to
168.6 riyals at the close in Doha. About 1.1 million shares were
traded, almost six times the three-month daily average,
according to data compiled by Bloomberg. The stock was the
biggest decliner on the Bloomberg GCC 200 Index and the most
traded by value on Qatar’s benchmark QE Index today.

VTB Capital’s Dubai-based Digvijay Singh, who lowered the
shares from hold, is the only analyst to recommend investors
sell the stock compared with 13 who advise on buying, according
to data compiled by Bloomberg. VTB Capital, the investment
banking unit of Russia’s second-largest lender, has a 135 riyal
price estimate on the stock, which rallied 12 percent in 2013
through yesterday. That outpaced gains of 5.6 percent for the QE
Index in the period and 4.2 percent for Saudi Basic Industries
Corp., the region’s biggest petrochemicals maker.

Doha-based Industries Qatar’s fertilizer unit is “likely
to provide a potential negative surprise and we advise investors
to book profits in IQ at prevailing price levels,” Singh wrote
in a research report dated yesterday. The company may report a
41 percent increase in fourth-quarter profit next week,
according to the average estimate of six analysts on Bloomberg.
Industries Qatar said today it delayed a board meeting to Feb.
21 from Feb. 18 to approve financial results.

‘Optimistic Scenario’

The earnings projection is an “optimistic scenario” given
“medium-term fertilizer price risks,” Singh wrote in the
report. “Although Industries Qatar is a great industrial asset,
has very respectable cash flow yields and a robust earnings
outlook, the recent price action is based on questionable
earnings assumptions.”

Sabic, which has an estimated 2013 price-to-earnings ratio
of 9.9 times according to data compiled by Bloomberg, offers
more value than Industries Qatar, whose shares trade at 11.2
times projected profit, according to VTB Capital. The Qatari
company’s 26 percent jump in third-quarter profit was a “one
off,” according to the report.

Industries Qatar’s 14-day relative strength index fell to
56 today from 76, having breached 70 in January. A rise above
that level indicates to some analysts that a security is poised
to decline.